George Osborne has underlined the government’s determination to reduce Britain’s deficit by reducing public spending in his 2011 budget.
The Chancellor told the House of Commons this lunchtime that the tough package of cuts – and some tax rises – that he outlined last year had “achieved stability” but “stability was not enough.”
He then went on to outline a number of measures designed to boost growth by simplifying the tax system, providing encouragement to small businesses and exporters, and creating a better educated and more flexible workforce.
But he made no mention of putting more money into public services or reducing the large numbers of job losses that they are expected to make.
Indeed, the Guardian reported this morning that Osborne plans to make permanent the ‘star chamber’ of senior ministers that he set up to oversee departmental spending plans, and to hold departments to account if they fail to make their savings targets.
Nigel Edwards, the acting chief executive of the NHS Confederation, responded: "The figures reinforce what NHS leaders have known for some time; that while the NHS has done relatively well when compared to other parts of the public sector, this is a difficult financial settlement that will cause real pain.
"There will be some hard decisions to be made about staffing levels, service reconfigurations and investment priorities if we are to prevent a financial crisis in the NHS and continue providing high quality care."
The only direct mention of the NHS came when Osborne said that the Treasury has accepted the recommendation of the NHS Pay Review body to freeze staff pay for 2011-12, except for those earning less than £21,000 a year, who will see their pay rise by £250.
The announcement, which also affects other public sector pay including teachers, prison officers and the armed forces, was first announced in last June’s budget. The Department of Health recently adjusted the Quality and Outcomes Framework for GPs so they can make the £250 payment to low-paid staff.
Some low-paid NHS workers will also benefit from changes to the personal tax allowance, which will rise by £630 to £8,105 from next April.
Unison icondemned what it called the ‘no budge budget’, saying Osborne had missed the chance to “scale back the savage spending cuts” that it claimed would “condemn the economy to long-term low growth and high unemployment.”
The union claims that a ‘Robin Hood Tax’ on banks would raise £20 billion to support children’s nurseries, “stop hospitals shedding jobs” and save social services from closure.
In his first, emergency budget last June, Osborne said that a reduction in public spending would account for 77% of the government’s action to eradicate the deficit within five years, and tax increases 23%.
His plans assumed growth of up to 2.8 next year, and unemployment of 8.1%. Today’s budget showed he had little room for manoeuver.
At the start of his speech, he outlined estimates for borrowing that suggest the country will borrow £146 billion this year – just £2 billion less than the projection in June – falling to £29 billion in 2015-16.
Osborne was also forced to revise down the estimate for growth this year to just 1.7% and for next year to 2.5%, eventually growing to 2.8% in 2015. At the same time, Osborne said inflation would remain between 4% and 5% this year, falling to 2% in 2014.
High inflation, driven by fuel, clothing and food, will add to the financial pressures on the NHS, which has been set a ‘challenge’ to find £20 billion of efficiency savings over four years to meet the shortfall between essentially flat funding and rising demand and costs.
At its annual conference for hospital consultants today, the chairman of the BMA’s consultants committee, Dr Mark Porter, warned that some “low value” services, such as cataract surgery, were already being stopped and rationed.
He warned that over time, the combination of savings and tougher competition introduced by the ‘Liberating the NHS’ reforms would “result in many trusts being unable to cover the costs of entire departments” or lead “whole organisations to fail.”
However, trusts should benefit from one of Osborne’s few eye-catching consumer initiatives – the move to introduce a fuel duty stabiliser to counter the rapidly rising cost of fuel.
Public health experts will also have been pleased to see tobacco duty increase by 2p over inflation; although alcohol duty was frozen.